Franchising heats up retail sector

Update:
June, 13/2012 - 08:38

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A KFC franchise is seen in the capital city's Hang Bun Street. Statistics from the Ministry of Industry and Trade show that up to 70 foreign firms have registered franchising businesses in Viet Nam. — VNS Photo Doan Tung

HCM CITY — Franchises have become an increasingly active retail sector for foreign investors, according to experts at a conference in HCM City yesterday organised by the Ministry of Industry and Trade's domestic market department, the US Agency for International Development (USAID) and the Starplus Project.

Such international franchises as KFC, Pizza Hut, Round Table Pizza and Hard Rock Cafe from the US, Hong Kong, Singapore and Thailand have successfully established a foothold in the local market, with franchises appearing not only in the food and beverage sector but in other retail goods and services.

Yum Brands' KFC opened its first outlet in Viet Nam in 1997 and now has 1,000 restaurants here – a figure it expects to double by 2015, as it nails down a whopping 60 per cent of the fast food market. Meanwhile, Yum Brands has also introduced its Pizza Hut franchise here, beginning in 2007. There are now 20 Pizza Hut restaurants in the country.

Statistics from the Ministry of Industry and Trade show that up to 70 foreign brands have registered franchising businesses in Viet Nam. Most are consumer brands that target youth and the nation's increasingly affluent middle class consumers.

Sean T. Ngo, chief representative of Viet Nam Franchises Ltd, said franchising was one of the world's most popular business models, generating high turnover and allowing brands to be developed across several markets.

Companies which franchised their brands would be able to rapidly increase their growth rate, surpassing rivals in term of market penetration, while franchisees can enjoy the benefit of major trademarks, established supply chains, and training support, Ngo said.

However, the two parties to a franchise agreement should fulfill their commitments and closely co-operate to avoid the risk of brand dilution, he added.

Franchising has benefited both foreign enterprises and the country, with increased earnings, brand prestige, jobs and job training, and more choices for consumers, said Frank Joseph, a representative from the US Embassy to Viet Nam's Foreign Commercial Services Office, which serves as a bridge to US businesses seeking to invest in such areas as services, marketing, and education and training. — VNS